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How to Minimise Risk as a Forex Trader

When appraising the daily trading volumes associated with the forex market, there are two perspectives that you can take. You could marvel at the current average of $5 trillion, for example, which is invested across three separate sessions during each 24-hour period. Conversely, you could also cite that the markets volumes have dipped by around 9% since September 2014, when approximately $6 trillion was traded through currency on a daily basis.

Coping in a Volatile Market: How to Minimise Risk as a Forex Trader

Much of the appeal of the forex market revolves around its liquidity, while the foreign exchange is also a particularly volatile space. This means that the most successful traders have the ability to minimise risk, so here are some of the best methods that you can use to achieve this aim: –

Make Currency Part of a Diversified Trading Portfolio

While currency can deliver significant gains when it is traded successfully, it is a volatile derivative that can experience sudden, and unexpected, price shifts. This is part of the forex market’s unique nature, although some of this volatility can be negated by including currency as part of a vast and diversified trading portfolio. By combining currency with more risk-averse asset classes such as premium stocks, bonds and dividend investments, you can strike the ideal balance between risk and reward and immediately reduce the impact of forex market fluctuations.

Hone Your Trading Strategies Using a Demo Account

If you trade currency using an online platform such as FXPro, you will probably be aware of how demo accounts work and their core purpose. These accounts essentially offer users access to a simulated but real-time marketplace, where traders can hone and adapt their strategies without risking their hard-earned capital. This is also a feature that can be accessed at any time during your trading efforts, which in turn helps you to develop new techniques depending on the economic climate.

This is also an excellent risk-management technique, as it allows you to develop crucial skills that can help you to negate macroeconomic factors.

Apply Stop-losses to Your Account

On a final note, you should also look to regulate your account according to your available capital, risk profile and trading outlook. You can achieve this by applying stop losses to your trading account, which are thresholds relating to the maximum level of capital that you are prepared to lose during a specific period. So, if the market suddenly depreciates and your trades begin to incur losses, your positions will immediately be closed once the predetermined threshold has been reached.

While this does not recoup any money lost previously, it minimises losses and helps you to manage the risk associated with your account.